UK public borrowing falls less than expected

UK public borrowing fell less than expected in October, reflecting higher interest payments on public debt even as the end of the government’s furlough scheme pushed down spending.

Public sector net borrowing was estimated to have been £18.8bn last month, £200m less than in October 2020, data from the Office for National Statistics showed on Friday. This was much higher than the £13.8bn forecast by economists polled by Reuters.

Meanwhile, early Christmas shopping helped British retail sales return to growth in October after nearly half a year of contraction. The volume of monthly retail sales in the UK grew 0.8 per cent between September and October, the ONS said on Friday.

This was stronger than the 0.5 per cent expansion forecast by economists polled by Reuters, and it marked the first expansion after five months of consecutive falls — the longest period of an uninterrupted decline on record.

Central government bodies spent £78.8bn, £1.5bn more than in the same month last year despite the end of expensive pandemic programmes such as the job retention and the self-employment income support schemes.

Column chart of % of GDP, fiscal years showing UK public debt has reached levels last seen in the 1960s

Interest payments on public debt, linked to the surging retail price index, rose to £5.6bn in October, up from £1.8bn in the same month last year.

At the same time, central government receipts were estimated to have been £65.5bn, £3.8bn more than in October 2020 as business activity continued to recover from the hit of the pandemic.

This was still the second-highest October borrowing since monthly records began in 1993, reflecting the large impact of the Covid-19 interventions on public finances. Public debt — borrowing accumulated over time — was around 95.1 per cent of gross domestic product, a level not seen since the early 1960s.

In its October fiscal outlook, the Office for Budget Responsibility, the UK fiscal watchdog, revised down its borrowing forecast for the current fiscal year to £183bn, £51bn less than what was estimated last spring following stronger economic growth than previously anticipated.


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